Greenwashing growing in frequency, complexity

Dive Temporary:

• Firms making deceptive environmental claims, or greenwashing, made up 25% of climate-linked threat incidents from September 2022 to September 2023, up from 20% the identical interval the yr prior, in accordance with ESG data and research firm RepRisk. The report examined each private and non-private corporations, globally and throughout sectors.
• RepRisk’s report documented situations of greenwashing rising 35% total final yr, with greenwashing within the monetary companies and banking sectors growing 70%. Behind the oil and gasoline trade, the monetary sector has the second-largest share of incidents over the previous two years.
• Eighteen p.c of corporations — and 31% of public corporations — who’ve engaged in greenwashing since 2018 additionally participated in social washing, or making deceptive social claims, within the final yr.

Dive Perception:

RepRisk stated it recognized rising and extra advanced greenwashing dangers in Europe and North America, as corporations transcend deceptive customers via direct communications and look to obtain certificates and make pledges to bolster their look of being extra sustainable.

The report from RepRisk, which helps purchasers determine, monitor and handle ESG-related dangers, stated 25% of the climate-related dangers it documented since final September had been associated to greenwashing.

Local weather change and problems with fossil gasoline had been each widespread matters of deceptive claims. Fifty-four p.c of corporations in Asia, Europe and North America greenwashed their information on greenhouse gasoline emissions, world air pollution and different local weather change-related points, in accordance with the report. Fossil gasoline financing was a serious driver of the focus of greenwashing within the monetary and banking sectors. Greater than half of documented claims from the sectors both talked about fossil fuels or tied a monetary establishment to an oil and gasoline firm.

“The expectation of aggressive benefit derived from a picture of sustainability has opened the door to inexperienced and social washing,” RepRisk CEO Philipp Aeby said in a release. “A scarcity of accountability round a quickly evolving panorama of company sustainability has helped maintain this door open for a very long time.”

Firms who have interaction in greenwashing, or what Aeby known as “symbolic sustainability,” could have anticipated kudos however have as an alternative acquired heightened public criticism for his or her deceptive claims. Aeby stated that corporations want clear knowledge to evaluate their publicity to environmental and social dangers.

The report additionally was RepRisk’s first endeavor to doc social washing, which the group defines as contradictions between a enterprise’ picture and precise conduct on social points. The report seemed for deceptive communications on points like human rights, occupational well being and security, group affect or baby labor.

The corporate discovered that lots of the social points had been carefully tied to environmental points, documenting 1,544 environmental and social points. Not solely are corporations who greenwash extra more likely to social wash, however they make the most of related playbooks and ways like selective disclosure, symbolic gestures and company political motion. Deceptive communications on social points — 1,116 documented — with out an environmental part rose 15% final yr however at a slower price than environmental-only dangers — up 35%.

With greenwashing turning into extra prevalent and complicated, the Securities and Trade Fee not too long ago updated the Investment Company Act’s “Names Rule” to chop down on deceptive communications from the funding sector. The SEC’s updates require funding corporations who’ve a particular focus of their identify, reminiscent of ESG or sustainable funds, to speculate 80% of their funds into belongings that serve that goal. 

Funds with greater than $1 billion in belongings can have 24 months from Nov. 13 — the rule’s effective date — to conform, whereas funds with lower than $1 billion can have 30 months. SEC Chair Gary Gensler stated the amendments had been obligatory after the previous twenty years of funding trade growth led to gaps within the rule.